How to Reset Your Trading Account After Blowing Up An Account
How many times have you blown up your account? I can tell you that I have blown up my twice, and it is very frustrating, overwhelming and disheartening. However, I want to showcase in this article, how you can return from that. Trading isn’t all sunshine and gains — setbacks happen, and they’ll help you become a better trader. Let’s discuss the simple steps to recovering and profiting after blowing up your account.
Wait and Assess
The first step in recovering from a blown-up trading account is to wait and assess the situation. After a loss, emotions can run high, and impulsive decisions can lead to further losses. Waiting allows you to take a breather and detach from the emotional turmoil. This is crucial for making rational decisions moving forward.
During this waiting period, take the time to review your trading history. Analyze your best and worst trades. What stocks did you trade? What setups worked for you, and what didn’t? This evaluation will provide insights into which strategies have potential and which might need adjustments.
Paper Trade to Refine Your Strategy
As you’re waiting and evaluating your trades, consider engaging in paper trading. This practice involves making simulated trades without using real money. Paper trading allows you to test different strategies and refine your approach without risking your capital.
While paper trading focuses on developing a systematic approach. A strategy tells you what to look for and when to buy, while a system is a comprehensive plan that encompasses entry and exit criteria, sizing, and risk management. By crafting a well-defined system, you’ll have a roadmap to follow during trades and a safety net to prevent emotional decision-making.
Scale Gradually and Mindfully
Once you’ve assessed your previous trades and refined your strategy through paper trading, it’s time to re-enter the market. However, this should be done with caution. Start small and scale your trading activities gradually.
When scaling up, follow a rule of thumb to risk no more than 10% of your account size on any trade. This approach ensures that a single loss won’t devastate your account. As you become more comfortable and confident, you can increase your position size incrementally. Remember, trading is a long-term endeavour, and patience is vital.
Blowing up a trading account is undoubtedly a setback, but it doesn’t have to end your trading journey. Following a structured three-step strategy, you can reset your account, refine your trading approach, and gradually scale your activities. Embrace the lessons learned from your mistakes, and use them to make informed decisions.
Trading success is built on discipline, strategy, and continual learning. Whether you’re a novice trader or a seasoned professional, remember that setbacks are growth opportunities. By approaching your trading journey with patience and a clear plan, you’ll be better equipped to achieve your financial goals and navigate the challenges of the market.
Remember: If you’re looking for a comprehensive trading system that guides you through the process step by step, consider exploring our free trading handbook and guide. This valuable resource condenses years of experience into a practical framework to help traders succeed. Don’t let setbacks define your trading career — take control and reset with purpose.
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Thanks for reading 🙂
CEO & Chief Strategy Officer